Gold has struggled to find consistent bullish momentum as it tests resistance around its 200-day moving average. April gold futures last traded at $1855.60 an ounce, down 0.18% on the day.
However, one bank is looking past the current consolidation, and it expects gold and silver prices will continue to move higher in what they see as the start of the seventh commodity bull market in 225 years.
"A commodity bull market is part and parcel of a new secular inflationary regime, a development few investors alive recall during their professional careers, as the last one ended about 40 years ago," said Steen Jakobsen, chief investment officer at Saxo Bank, in the bank 's first-quarter outlook report.
"We think this theme will rapidly come to dominate investors' attention in 2021, and could last for a decade or more. The key driver is the enduring response to the pandemic, which only accelerated trends in inequality that had been building since the 1980s and the following three decades of globalisation. From here on out, we will see a real macro paradigm shift as the policy focus drifts away from the traditional focus on ensuring financial stability to one that demands social stability above all else," he added.
Looking specifically at the precious metals market, Ole Hansen, head of commodity strategy at Saxo Bank, said in the first-quarter report that he expected gold prices would continue to be well supported by rising inflation pressures, coupled with a weaker US dollar.
Currently, the bank is looking for gold prices to push to $2200 an ounce this year, with silver prices rising to $35 an ounce.
Despite gold 's lacklustre performance in the last two weeks, Hansen said, "we maintain a constructive view on the sector with rising yields being primarily the result of a gold-supportive rise in inflation expectations; this will leave real yields, a key driver for gold, well into negative territory. Together with accommodative central bank policies and renewed dollar weakness, the path of least resistance remains to the upside."
The Danish bank noted that it does not expect the US dollar or bond yields to provide but of a headwind for gold and commodities. John Hardy, head of foreign exchange strategy at the bank, said that growing government debt is creating an almost existential crisis for the US dollar.
"The rise in gold, bitcoin/crypto assets, hard assets of any kind and the sudden increase in monetary velocity caused by an exodus from US dollar-linked former risk-free assets like treasury bills and treasuries could theoretically even trigger an outright US dollar crisis," he said.
Hardy added that the US dollar would not find much support from rising bond yields, because at some point, the Federal Reserve would have to step to keep monetary policy accommodative.
"The level at which higher rates become a problem has dropped sharply just as it has for every cycle since the 1980s," he said. "Whether the level that gets markets into trouble is 1.25% or above 1.50% in the US 10-year benchmark, trouble lurks …"